Sao Tome fears oil money may cause more problems than it solves

Jan 06, 2004 01:00 AM

It sounds like every poor country's dream: strike oil, get rich, wave one goodbye. But on the West African Sao Tome islands, where a big influx of cash from crude may be just months away, fears are growing that the money may cause more problems than it solves. Jolted by a coup attempt linked to the promise of new-found wealth and surrounded by neighbours where oil has fuelled chaos, many islanders wonder if their government is prepared for the shock.
"Unless we put things in some order now, this will be a total mess," said Carlos Tiny, a one-time presidential candidate on the former Portuguese colony. "So far, things are not in order."

Time is short. The US oil major, ChevronTexaco says it is poised to win an offshore oil exploration block with a bid of $ 123 mm, grabbing a chunk of one of Africa's hottest prospecting zones.
For islands which typically export about $ 4 mm worth of goods a year, much of it -- cocoa and bananas, oil fees represent vast amounts of money that could transformthe economy. The islands simmer with intrigue spurred by the increase in the financial stakes for those in office. Interest from foreign players from Nigeria, to the United States, in an estimated 6 bn to 11 bn barrels of crude has further muddied the waters of the island's volatile politics, putting a little-known backwater on the strategic map.

The government says it is in control and preparing to manage the inflow of money, but the next few months may yield clues as to whether Sao Tome is ready for a better life or will succumb to the curse of so many oil-rich African states. The continent is littered with examples of how not to do it -- some just a few hundred miles from the volcanic peaks of Sao Tome, where many of its 140,000 people live without running water or electricity.
Civil wars have wrought havoc in oil exporters, Angola and the Congo Republic, while Nigerians jointly managing Sao Tome's exploration zone -- blame oil as the source of much of the corruption blighting their country. Anxiousto learn from others' mistakes, Sao Tome is working with the World Bank to set up measures to deal with the cash, such as creating a fund to smooth revenue flows and save money for when the oil runs out.

Analysts say such funds are no panacea, potentially providing a tempting cash cow for greedy politicians or collateral for loans that can suck states deeper into debt. Aiming to discourage any attempt to embezzle the new income, Sao Tome's parliament plans to pass laws before the first payments for exploration rights come that will force the government to publish figures for oil revenues.
Most islanders agree on the need for transparency, but several politicians worry that the plans may be undermined. So far, events on the islands suggest that dreams of oil wealth have aggravated tensions rather than soothed them. Army officers attempted to overthrow the government in July, saying they wanted to create a new one to combat poverty. No one was hurt, but the putsch revealed a streak of anger at the government for signing what the coup plotters regarded as flawed exploration contracts.
"At the bottom of it was oil," said Sabino Santos, the plotters' spokesman, who remains in Sao Tome under amnesty. "Those who signed them should be punished. They are mortgaging our future. They drive big cars, and a few km away, people are drinking river water."

President Fradique de Menezes weathered the coup attempt with mediation in which Nigeria played a key role, but some islanders say he has lost support through a perception that he is placing close allies in control of the oil. Critics say he is trying to wrest management from a more established class of politicians. They cite his appointment of Tome Vera Cruz as Minister of Natural Resources after the coup, and his choice of Prime Minister Maria das Neves, who has constitutional responsibility for oil contracts.
"Expectations fed the coup but the main source of instability is the president himself, including his erratic allegiances and decisions in the oil sector," said a senior oil official. "As a result, he is losing people. He is not as strong as before."

With the president apparently weakened, some observers detect a greater influence by Nigeria in the country's politics, where the prospect of oil has inflamed rumours of foreign meddling.
As Sao Tome's partner in a Joint Development Authority for the oil exploration zone, Nigeria will take 60 % of the revenue if and when crude does start pumping.

Source: Vanguard
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